A:

Payday loans or cash advances are short-term, low-balance, high-interest loans. They are known as payday loans because of a tendency for the funds to be borrowed on a post-dated check cashed on the borrower's upcoming payday. They are designed to be quick and easy, and they generally have very limited qualification loan requirements. The narrow time frames and high interest charges allow the lender to be less careful with granting credit. Payday lenders almost never check your credit score during the application process.

You find and apply for payday loans online or in-store. The application process typically takes 15 to 30 minutes. Standard payday loan requirements include proof of income, personal identification and a post-dated check for the balance of the loan plus fees.

Even though the fees for most payday loans come with set financing fees, some do include interest charges. The cost of the loan can be the equivalent of an annual percentage rate of up to 500% or even 1,000%. For this reason, payday lenders require usury licenses.

Even though payday loans do not require checking a FICO score, they can still negatively impact your credit rating. Delinquent payday amounts can be reported to credit bureaus. While it used to be the case that most payday loans were not reported if paid on time, several credit bureaus now collect payday lender information and sell it as part of their consumer credit reports.

Payday loans – without a credit score check – are not always a good idea. However, you may need to find an emergency financing option if you have already defaulted on funds borrowed from mainstream lending institutions and are either unlikely to receive a new traditional loan or do not have the time to wait for a lengthy application process.

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